Senate approves surface transport funding extension but challenges remain

Following the lead of its Congressional Colleagues in the House of Representatives, the United States Senate yesterday approved a measure geared to keep federal surface transportation funding intact through December 20 with a nearly $11 billion stopgap fix.

Earlier this month, the House voted for funding to remain intact through the end of May 2015. But the Senate vote does not represent a smooth ride ahead, with a report in The Hill noting that House Speaker John Boehner (R-Ohio) said he “wouldn’t accept the Senate’s changes, and would simply strip them out and send another bill back to the Senate.” This latest round of political tension comes at a time when the Department of Transportation has said that beginning this Friday, August 1, it will start to cut payments to state and local governments for road and transit projects by as much as 28 percent if Congress doesn’t take quick action, the report added.

As previously reported, the measure’s language points out what has been apparent for more than a while: the existing Highway Trust Fund system is unsustainable and unable to meet our Nation’s 21st century transportation needs, and also noted that Congress should enact and the President should sign a surface transportation reauthorization and reform bill prior to the expiration of this Act.

At the same time, this is not catching anyone off guard, considering that that the main funding mechanism for funding the HTF, the federal gasoline tax, has not been increased since 1993. HTF funds are allocated for federal highway, transit, and highway safety programs.  Diesel taxes represent about 90 percent of Highway Trust Fund (HTF) net revenues, which are vital when it comes to fixing, repairing and developing the country’s transportation infrastructure.

The Department of Transportation said recently that the HTF could dip below $4 billion by the end of this month, which stands as the minimum amount DOT “prefers to keep…in order to properly manage day-to-day financial transactions,” according to the American Association of State Highway and Transportation Officials (AASHTO). The HTF kicked off fiscal year 2014 on October 1, 2013 with a balance of $1.6 billion and after the beginning of the fiscal year it received a $9.7 billion transfer from the United States General Fund. But even with this bridge loan of sorts, DOT said,  “the surface transportation program continues to outlay at a greater pace than receipts are coming in.”
In other words, it is functioning as a model of insolvency.

What’s more, according to data from the Pew Charitable Trust, the Highway Trust Fund has lost nearly 40 percent of its total value to inflation since the last time gasoline taxes were increased in 1993, the New York Times reported.

Numbers from other sources don’t make the situation any more optimistic either, with the House Transportation and Infrastructure (T&I) Committee recently noting that by the end of 2014, a total of $54 billion will have been transferred from the General Fund into the HTF in order to remain solvent, including an $18.8 billion transfer signed off on by Congress as part of the federal transportation bill, MAP-21, which is set to expire at the end of September.

While raising the federal fuel tax ostensibly is the most logical and direct way to stem the HTF’s financial woes, it continues to be viewed as a “non-starter” on both sides of the aisle in Congress.

Instead, the Highway Transportation and Funding Act of 2014 turns to other potential revenue sources, including: extend pension smoothing relief that was enacted in 2012 as part of the MAP-21 legislation and would allow employers to continue to use historic interest rate averages to calculate their pension contributions, which is estimated to raise $6.4 billion over ten years; transferring $1 billion from the Leaking Underground Storage Fund (which addresses petroleum releases from federally regulated underground storage tanks) into the HTF, which would have no revenue effect; and require the Secretary of Transportation to charge and collect a fee of .3464 percent ad valoreum on merchandise formally entered or released into the U.S, which would raise an estimated $3.5 billion.

“The key players in Congress are all signaling that since the transfers from the general treasury accounts into the HTF have been going on for six years, this go around is again a short-term fix, and they are running out of off-sets and are scraping the bottom of the barrel,” James Burnley, a partner at Washington, D.C.-based law firm Venable LLP and former Secretary of Transportation under the late President Ronald Reagan, recently told LM. “Doing these short-term patches has gotten harder, and because of basic underlying trends each time we go through this, we need more money as the shortfall is growing. It is time for leadership in both parties to try to come to a consensus to a longer-term remedy, whatever that means, and find other alternatives. Political leadership in both parties in Congress is saying they have run their string out with short-term patches in this round and are not likely able to keep doing this.”

While there is now federal surface transportation funding through next May, Mort Downey, chairman of the Washington, D.C.-based Coalition for America’s Gateways and Trade Corridors noted that the current Congressional effort to find a temporary fix for Highway Trust Fund shortfalls is only a bandaid and the Administration’s focus is correctly on the need for long term action and adequate resources.

Transportation Secretary Anthony Foxx last week recently criticized the ten-month stop-gap as a short-term “gimmick” that once again fails to adequately fund U.S. infrastructure needs in the long run.
 
“If this short-term patch passes, it will not be time to celebrate,” Foxx told the National Press Club in a July 21 speech, shortly before Congress was scheduled to start its five-week summer recess. “It’s hard to imagine Congress will not push the snooze button on this issue again until crunch time.”
 
The nearly $11 billion authorization Congress was working on merely kicks the funding can down the road once again. This punt is the 27th short-term funding extension of the highway bill in the last five years—and Foxx warned these easy political fixes have to stop.

“If we’re not careful, we’ll be right here again with the shot clock set to expire, looking for an easy solution for a few more months, leaving the real conversation to another time,” Foxx said.